Potential LNG projects help fuel drilling activity
A need to prove that natural gas resources in British Columbia’s northeast can support potential liquefied natural gas (LNG) projects on the West Coast is helping spur a rebound in drilling-related activity in the province’s gas patch.
After dropping to a 10-year low in 2012, applications to drill wells are up and commission authorizations for wells have increased 53 per cent over the first six months of 2013.
To the end of June, the Oil and Gas Commission had granted authorization for 469 new wells, up from 307 over the same period of 2012.
Not all of those applications have translated directly into drilling. To the end of June, the commission counted 250 new wells drilled, compared with 265 over the same period a year ago.
But industry analyst Gordon Currie estimates much of any increase can be attributed to LNG proponents trying to establish the resources for their prospective projects, because even with a recent bump in North American natural gas prices, the economics for gas drilling are still difficult.
“I guess they want to establish for themselves and for future customers that there is enough gas there to back up a six-million-tonne per annum (of LNG production) proj- ect,” said Currie, a senior oil-and-gas sector analyst for the firm Salman Partners.
A large number of the authorizations have been granted to energy giants Shell Canada and Progress Energy Canada Ltd. in the Montney formation west of Dawson Creek, one of the rich shale-gas regions expected to support B.C.’s nascent liquefied natural gas export industry.
Both Shell and Progress, which is now a subsidiary of the Malaysian state-owned energy firm Petronas, are partners in separate, multibillion-dollar LNG proposals for B.C.’s coast. Currie said at his last count, Progress Energy has about 25 drilling rigs active in B.C. and “they’re going hell bent for developing those properties they have for their future LNG project.”
Shell is a partner, along with Korea Gas Corp., Mitsubishi Corp. and PetroChina, in LNG Canada, a proposed plant that will be capable of liquefying and exporting 12 million tonnes per year of natural gas.
Shell spokesman Stephen Doolan said Western Canada’s sedimentary basin is expected to supply the LNG Canada plant.